Getting out of liquor and pokies will cost Woolworths, but deliver lasting benefits

Woolworths has announced it will separate from its liquor and gaming businesses. While it may cost Woolies in the short term, Jason Pallant explains why it is the right move for the supermarket giant's reputation and brand image, in this crossposting from The Conversation.

The Woolworths Group proclaims it celebrates “family-friendly values”. Within its supermarkets the company has sought to demonstrate this commitment. Woolies gives out free fruit to kids, for example, and no longer gives out plastic bags.

Being a company committed to ‘family-friendly values’ and corporate social responsibility does not sit well with profits from drinking and gambling.Dallas Kilponen/AAP

Its goal, the group states, is to “inspire our customers to consume all of our products in a healthy, sustainable way”. It’s a noble goal – but one undercut by its profits from pubs and pokies.

The company announced yesterday it will separate from its liquor and gaming businesses. This should be be welcomed as a bold step showing its stated commitments aren’t just PR gimmickry.

Alcohol and gambling both represent significant social problems in Australia. The number of alcohol-induced deaths in 2017 – 1,366 – was the highest in two decades. Per capita gambling losses are the highest in the world.

Just last month, several Woolworths-owned hotels in New South Wales were accused of serving free drinks to encourage patrons to continue gambling.

As much as Woolworths might have done to ensure these business divisions operate as responsibly as possible, there is a stigma associated with their profits. They do not fit easily with “family-friendly values”.

Reputational risk

Continuing to operate these businesses would represent a clear reputational risk for Woolworths at a time when consumers increasingly expect organisations to walk their talk and demonstrate they make a positive impact on society.

Protestors outside the Woolworths Group’s annual general meeting in Sydney, 2015. David Moir/AAP

This trend in consumer sentiments is demonstrated by the result of Swinburne University’s Australian Leadership Index. The index is based on a nationally representative survey run quarterly. It tracks consumer perceptions about whether organisations show leadership for the greater good.

At the aggregate level, perceptions of big companies like Woolworths are consistently negative. More consumers think they do little to nothing to contribute to the greater good than those who think they make a positive impact. There is clear desire for businesses to contribute more to society.

Research by global professional services firm Accenture indicates 61% of Australian consumers consider a company’s ethical values and authenticity when making their purchasing decisions, and 40% have boycotted a company over its actions on a social issue. Younger consumers are particularly adamant that companies have clear social values.

The Woolworths Group will first combine its pubs and liquor retail divisions into one, then spin off that division into a separate company, listed on the Australian Stock Exchange.

Losing the revenue will cost Woolworths. But the potential long-term benefits are considerable.

The separation presents an opportunity for the group to create a clearer perception among consumers of the company’s values – a smart move in an evolving marketplace of empowered consumers demanding organisations be social leaders.

This is more than PR gimmickry, it’s about allowing Woolies to focus in their core business, which is selling groceries. The ‘family values’ spin is just that, spin.

By ditching non-core businesses, such as hotels, Woolies become less of a behemoth and should be more nimble. They have the beast of Omni channel to crack, without worrying about a bunch of pubs. Unfortunately, losing the liquor division is collateral damage to this and time will tell if jettisoning Dan Murphys was a good idea.

The family values piece is nonsense. How many people have changed shopping habits for this reason? A very small minority at best, despite the pokies situation being well known for years. Australians love a deal and will shop with the best value alternative, pokies or not.

KGB,
I definitely agree that focusing on the core business is a big/ main reason for the move. Woolies said as much in their ASX announcement. My point here was that it also presents an opportunity for a side benefit of more clearly distinguishing the values/ propositions of each part of the business.
Cheers,
Jason

Good decision but a bandaid attempt to appease the public. I for one don’t buy any none grocery items from the supermarkets. I use my consumer power to support small local businesses that slave away… ie I walk next door to the newsagent to buy a magazine or newspaper. As I also do for vegetables and meats. I drive past the Woolworths or Coles service station and find the independent provider (usually cheaper and without those grubby discount vouchers). I assume most in this industry don’t do this as they seem to all just be grubby hanger-on’s who want free samples and … of course free booze at tedious launches etc 😉

Most Australians, industry or not, shop at the major supermarkets because it’s convenient, cheap and they stock the products they are looking for. I’m not sure what this has to do with being a hanger-on, free samples or product launches.

They are consolidating the pubs and alcohol into a new group called Endeavour, they will then demerge it and either float it or sell it.
It has been reported that they are looking to retain a ~18% minority stake in Endeavour

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